2018 (4) TMI 1610 - AT - Income Tax

Disallowance of expenditure alleged to be incurred for procuring business - Held that - Assessee received incentive bonus of ₹ 15,65,000/-. He has been further granted allowance of ₹ 1,56,000/-. It is 10% of incentive bonus which has been paid in accordance with scheme. This break up has not been filed in rest of the two years. Therefore we remitted this issue to the file of the Assessing Officer in other two years with a direction that Ld. Assessing Officer shall verify the amount of allowances given to the assessee in the capacity of Senior Business Associate for earning incentive bonus. In other words, the additional allowance for procuring business has to be allowed to the assessee considering as reimbursement of actual expenditure. Ground No B & C in A.Y. 2011-12 & 2012-13 are set aside to the Assessing Officer for re adjudication. Disallowance of SBA allowance and development allowance - assessee treated these amounts as business income and claimed corresponding deduction in the shape of depreciation etc. - Held that - Revenue Authorities have rightly treated them as a salary income because assessee was a salaried employee certain expenses could be allowed to him on reimbursement basis if incurred on behalf of the employer for procuring the business but he cannot be treated as doing any business. Therefore grounds of appeal are rejected. Determination of annual letting value of the house property - Held that - We direct the Assessing Officer to determine the ALV of the house property in these years in accordance with ITAT order passed in A.Y. 2008-09. Whether assessee is entitle to any expenditure under the head business expenses? - Held that - The assessee separately cannot claim any expenditure under the head business expenditure. In A.Y. 2011-12 & 2012-13, the assessee has not given us the breakup of the expenditure additionally given by LIC to him for earning additional incentive or performing duty as a senior business associate. The scheme considered by us in A.Y. 2010-11 and reproduced above, authorized 10 % of additional convenience allowance or as allowance of the incentive bonus for procuring business, this 10% is to be determined on the basis of certificate of LIC giving the breakup of these expenditure. Thus this issue is also set aside to the file of Assessing Officer. Ld. Assessing Officer first determined the expenditure which were to be construed as a reimbursed by the LIC for procuring business in the capacity of a senior business associate and thereafter work out the total amount allowable to the assessee in A.Y. 2011-12 & 2012-13 - Appeals of the assessee are partly allowed.

Summary

Issues Involved:
1. Reopening of assessment.
2. Disallowance of 20% of the conveyance expenses.
3. Disallowance of expenditure for procuring business.
4. Determination of annual letting value (ALV) of house property.
5. Allowance of interest expenditure against house property income.
6. Disallowance of business expenses.

Issue-wise Detailed Analysis:

1. Reopening of Assessment:
The assessee contested the reopening of assessments for A.Y. 2010-11 and A.Y. 2012-13. However, the assessee's counsel did not press these grounds, and thus, they were rejected.

2. Disallowance of 20% of the Conveyance Expenses:
The assessee's grievance regarding the disallowance of 20% of the conveyance expenses for A.Y. 2010-11 and A.Y. 2011-12 was also not pressed by the counsel and thus, these grounds were rejected.

3. Disallowance of Expenditure for Procuring Business:
The assessee, a development officer with LIC, claimed allowances under various heads, including fixed conveyance allowance and additional conveyance allowance. The Assessing Officer disallowed 20% of these allowances due to lack of complete bills and vouchers. This disallowance was confirmed as the assessee did not press this ground.

For the claim of business procurement expenses, the assessee argued that 10% of the incentive bonus received should be considered as reimbursement of expenses incurred in procuring business. The scheme by LIC allowed certain development officers to be designated as Senior Business Associates (SBA) and receive additional allowances. The Tribunal found that the incentive bonus and additional allowance were indeed for reimbursement of expenses as per the scheme and allowed the claim for A.Y. 2010-11. However, for A.Y. 2011-12 and A.Y. 2012-13, the assessee did not provide the necessary break-up of allowances, and hence, the issue was remitted back to the Assessing Officer for verification.

4. Determination of Annual Letting Value (ALV) of House Property:
The Assessing Officer had determined the ALV of the house property, which was contested by the assessee. The Tribunal referred to its previous decision for A.Y. 2008-09, where it directed the ALV to be determined based on the municipal valuation. The Tribunal directed the Assessing Officer to follow the same approach for the years under appeal.

5. Allowance of Interest Expenditure Against House Property Income:
The assessee claimed interest expenditure against house property income, which was not separately discussed by the Assessing Officer. Since the issue of ALV determination was remitted back, the Tribunal also remitted this issue to the Assessing Officer to verify and decide in accordance with the law.

6. Disallowance of Business Expenses:
For A.Y. 2012-13, the CIT(A) enhanced the disallowance of business expenses, stating that the assessee was not carrying on any business and thus could not claim business expenses. The Tribunal reiterated that the assessee, being a salaried employee, could only claim expenses reimbursed by LIC for duties performed as an SBA. The issue was remitted back to the Assessing Officer to determine the allowable expenses based on the scheme and the certificate provided by LIC.

Conclusion:
The appeals were partly allowed, with several issues being remitted back to the Assessing Officer for re-evaluation and verification. The Tribunal upheld the disallowance of conveyance expenses and the treatment of certain allowances as salary income, while allowing the claim for business procurement expenses as per the LIC scheme for A.Y. 2010-11 and directing further verification for subsequent years. The determination of ALV and interest expenditure against house property income was also remitted for reassessment.